What happened
The multiyear journey of Virgin Galactic Holdings (SPCE -5.64%) to try to launch a space tourism service took another setback in August, and a growing number of investors and analysts appear to be losing hope. Shares of Virgin Galactic fell 20.6% in August, according to data provided by S&P Global Market Intelligence, after the company once again pushed back its launch timetable.
So what
Investors had high hopes for Virgin Galactic when the space stock hit public markets in October 2019, but it has been a mostly downward journey for the shares in recent years. The company had originally hoped to launch regular service to space in 2020, in time for founder Richard Branson's 70th birthday, but a series of delays has left Virgin Galactic grounded.
The stock lost about half of its value in the first six months of 2022 after Virgin Galactic said it would not launch a regular schedule this year. In early August the company said the target for commercial operations is the second quarter of 2023, later than some investors had hoped.
Virgin Galactic's latest quarterly results, released in early August, highlight why investors are concerned. The company lost $0.43 per share in the second quarter, an increase from a $0.39 per-share loss in the same three months of 2021, on revenue of just $357,000. The company also said it expects to burn through more than $100 million in the current quarter.
The results and the fresh delays caused a number of Wall Street analysts to hit the "eject" button during the month. Truist downgraded Virgin Galactic to sell from hold, with analyst Michael Ciarmoli citing growing R&D costs, supply chain risks, and elevated cash burn along with the continued delays. A week later Bank of America, which already had an underperform rating on the shares, lowered its price target to $5 from $7.
Now what
There was some hint of good news in the quarter. Virgin Galactic does appear to be making some progress ironing out the issues that have plagued it for years, and the company in recent months has announced firm plans for where and when it will build its next-generation spaceship and related infrastructure.
The company also has a wait list of more than 500 people who have signed up to pay upwards of $450,000 for a few seconds in space. If Virgin Galactic can get its service off the ground and begin to generate revenue, the temporary cash burn due to R&D spending will be well worth it.
It still isn't clear what the total demand for space tourism at such elevated prices is, and Virgin Galactic faces increased competition from the likes of Jeff Bezos' Blue Origin for whatever demand is out there. Virgin Galactic remains a moon shot, and going on three years since its public launch there are fewer and fewer investors interested in remaining on board.
